Archived - Evaluation of the Trade Management Program (Trade Incentives, Licensing and Registration) - Final Report

April 2014

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Executive Summary

Background

The Trade Management Program includes three broad program activity areas: trade incentives, licensing and registration, which are introduced briefly below.

Trade Incentives programs
The Canada Border Services Agency (CBSA) administers the Trade Incentives programs on behalf of the Department of Finance Canada. The purpose of the programs is to keep Canadian companies competitive and encourage business in Canada by providing relief, deferral or refund of some or all duties and taxes otherwise payable on imported goods. In 2011-2012, CBSA expenditures for these programs were approximately $3.14M.Footnote 1

Licensing programsFootnote 2
The CBSA authorizes, by licence, private and commercial entities to engage in cross-border trade activities on behalf of importers or the CBSA. In 2011-2012, CBSA expenditures for these programs were approximately $1.69M.Footnote 3

Registration programs
The CBSA’s Registration programs serve to expedite the importation and release of commercial goods whereby an importer posts monetary security, or a commercial carrier obtains a unique client identifier which facilitates carrier tracking. In 2011-2012, CBSA expenditures for these programs were approximately $1.01M.Footnote 4

Evaluation Purpose

The purpose of the evaluation was to assess the relevance, performance and efficiency of the Trade Management Program, in accordance with the Treasury Board Secretariat Policy on Evaluation. The CBSA’s Program Evaluation Division (PED) carried out the evaluation research between August 2012 and March 2013. The data collected from various methodologies, using both quantitative and qualitative methods, was triangulated to develop the findings. The recommendations presented are based on these findings.

Summary of Findings

Relevance

Is there an ongoing need for the programs and are they aligned with the CBSA mandate?

There is a rationale and a need for the Trade Incentives and Registration programs. They are relevant to the mandate of the CBSA. The rationale for the necessity of CBSA’s involvement in issuing some licences is not clear and there may be some benefit to alternative delivery mechanisms.

Performance

To what extent is compliance monitored?

The risk associated with all Trade Incentives programs is that the CBSA could be deferring, relieving or refunding duties and taxes that it should be collecting. Regions are responsible for monitoring compliance which should be taking place regularly and according to established regulations, policies and guidelines. [*]

To what extent are trade participants compliant?

Based on available data for the Trade Incentives Program, some sub-programs have higher rates of compliance than others. The amount gained in additional revenues from audit and compliance verification activities ranged from 0.3% of to 12% of total amount of duties and taxes deferred, relieved or refunded.

To what extent do the Trade Incentives programs promote trade and keep participating companies competitive?

The Trade Incentives programs keep participating companies competitive by reducing costs and improving cash flow. From 2007-2008 to 2011-2012, the total value of duties and taxes deferred, relieved or refunded was $7.82B. The amount deferred consisted of $4B, whereas the amount relieved and refunded comprised $3.82B. Combined, this represented 6.4% of the total duty and tax revenue collected by the CBSA over the same period. In 2011, approximately 1% of importers participated in four of the Trade Incentives programs, and 8%Footnote 5 participated in the Remission Orders sub-program. No performance data was available on the impact of the programs on the Canadian economy as a whole.

Are clients consulted with and informed of program requirements in an effective manner?

Customs brokers, who rely on the information communicated by the CBSA in order to serve their clients/importers, are very satisfied with the availability and quality of CBSA information. CBSA consultations also take place with the importing community to ensure they are informed. The Department of Finance promotes the Trade Incentives programs on its website and provides links to the CBSA website.

Economy and Efficiency

Are the programs delivered efficiently?

Generally the programs are efficient. This was measured by calculating input costs against outputs, over a five-year period where data was available. The cost to deliver the Trade Incentives programs (excluding the Northern Ontario and Atlantic regions) decreased from $3.66M (57.78 FTEs) in 2007-2008 to $3.14M (43.06 FTEs) in 2011-2012. Within national headquarters, the cost decreased from $1.47M to $785,000 over the same period. Also, during the same period, the total amount of duties and taxes deferred, relieved or refunded for each dollar in salary expenditures increased from $386 to $440.

The Licensing programs were expected to cost $522,000 in 2012-2013 based on the Resource Allocation Model.Footnote 6 A comparison was conducted of salary expenditure costs in 2012-2013 for each of the four licensing sub-programs, and the number of hours to process a new licence or to renew an existing licence. For three of the four licensing sub-programs, the average cost ranged from $94 to $106 per licence, all within a narrow range, taking on average between 2.1 and 2.4 hours to process. The exception was the Coasting Trade Licensing sub-program, whose average cost was $558 per licence, with an average processing time of 11.6 hours. However, this higher number reflects that this licensing sub-program issues only new, one-time licences, which require more processing time than renewing existing licences.

Fees are also currently collected for two of the Licensing programs, the Customs Brokers and the Sufferance Warehouse Licensing sub-programs.Footnote 7 From 2007-2008 to 2011-2012, $1.8M and $2.7M were collected respectively in annual fees or approximately $360,000 and $540,000 on average annually. These fees offset the salary expenditures.

The cost to deliver the Registration programs averaged $1.01MFootnote 8 annually between 2007-2008 and 2011-2012. No fees are charged for these programs.

Are there more efficient or economical methods to achieve the expected results?

The Government of Canada’s Red Tape Reduction Action PlanFootnote 9 highlighted several areas where efficiencies can be gained at the CBSA to streamline processes for the importing community. Among others, they include single window delivery and service standards for the timely issuance of licences. In this regard, streamlining the issuing of licences by offering one point of contact would move towards this objective.

Recommendations, Management Response and Action Plan

Guidelines for monitoring compliance in the Trade Incentives programs are not being used in a standardized, consistent manner across regions [*]. The result is that the availability and quality of compliance information vary substantially. Based on available data, some sub-programs have higher rates of compliance than others. The amount gained in additional revenues from compliance audit and verification activities varied depending on the sub-program. [*] Also, for many of the trade incentives sub-programs, risks are mitigated through the application eligibility process, characterized by a separate application process for each sub-program, with different procedures.

In light of these findings and to ensure compliance with trade legislation and regulations, it is recommended that:

Recommendation 1:

The Programs Branch determine the type of compliance regime that would best serve the Trade Incentives Program and the CBSA, and develop a strategy and detailed implementation plan in cooperation with the Operations Branch, including the establishment of targets related to the compliance results expected. This is also to include a performance measurement and monitoring strategy.

Management Response

The Programs Branch agrees with this recommendation and will work with the Operations Branch, including the regional Trade Compliance divisions, to implement the required changes.

Management Action Plan Completion date
Working with the Operations Branch, the Programs Branch will develop a compliance strategy for its trade incentives programs as well as a related implementation plan. May 31, 2014
The Programs Branch will introduce a new online functional guidance request form and a dedicated general mailbox to facilitate regional communication with the unit. These tools will serve to track and monitor functional guidance requests and responses and will contribute to enhance its program oversight. May 31, 2014
The Programs Branch will work with the Operations Branch to develop and introduce a new distinct report that the regional trade divisions will be required to submit on a monthly basis. This report will capture data related to trade incentives compliance activities and results, and it will contribute to the Agency’s ability to monitor the efficiency and effectiveness of its programs. June 30, 2014
Working with the regional risk management units, the Programs Branch will develop a new risking strategy related to its trade incentives programs, including identifying and defining specific risk criteria, which will then be included in regional compliance risking and targeting activities and result in additional verifications. June 30, 2014
The Programs Branch will include compliance verifications decisions relating to drawbacks and duties relief as part of its regional quality assurance reviews in order to ensure that the verifications are conducted in a consistent manner and that the results are accurate. September 30, 2014
The Programs Branch will complete the development of an enhanced duties relief verification process and will incorporate it into its Trade Verification Manual. March 31, 2015

The Government of Canada’s Red Tape Reduction Action PlanFootnote 10 highlighted several areas where efficiencies can be gained at the CBSA to streamline processes for the importing community. Among others, they include single window delivery and service standards for the timely issuance of licences. Apart from monitoring the level of financial security for the Customs Broker Licensing sub-program, there is currently no other monitoring conducted related to the quality of services provided by customs brokers to importers nor their level of compliance with trade legislation and program requirements for which importers are ultimately accountable. The rationale for the necessity of CBSA’s involvement in issuing some licences is not clear.

In light of these findings, it is recommended that:

Recommendation 2

Programs Branch, in cooperation with Operations Branch, centralize the Agency’s licensing and registration processes and ensure that service standards for all sub-programs are implemented. In addition, Programs Branch, in cooperation with Operations Branch, conduct an analysis of the need for the CBSA to be involved in the issuing of licences.

Management Response

The Programs Branch agrees with this recommendation and will work with the Operations Branch to implement the required changes. This is consistent with the overall direction of the program.

Management Action Plan Completion date
The Programs Branch, in collaboration with the Operations Branch, will continue to look for opportunities for the further centralization of its licensing and registration work, then analyze the options and recommend a way forward. July 31, 2014
The Programs Branch, in collaboration with the Operations Branch, will develop, implement, monitor and report on service standards for the licensing of duty free shop and coasting trade activities. July 31, 2014
The Programs Branch, in collaboration with the Operations Branch, will complete an analysis of its work in respect of licensing and registration in order to determine whether those activities remain necessary in today's trade environment and are best carried out by the CBSA. September 30, 2014
Depending upon the results of its analysis, the Programs Branch, in collaboration with the Operations Branch, will explore different delivery mechanisms. Consultations with industry will then be undertaken and a recommended approach will be presented to senior management. December 31, 2014

1. Introduction and Context

The CBSA is responsible for providing integrated border services that support national security and public safety priorities and facilitate the free flow of persons and goods, including animals and plants, that meet all requirements under the program legislation.Footnote 11 In 2012, Canada imported over $462 billionFootnote 12 worth of goods. The CBSA released over 13.6 million commercial shipments and collected over $25 billion in duty and tax revenues in fiscal year 2011-2012 from imported goods.Footnote 13 This represented 10% of total Government of Canada revenues for the same period.

The Trade Management Program includes three broad program activity areas: trade incentives, licensing and registration, which are introduced briefly below. Exhibit 1 provides a list of the individual sub-programs. A detailed description of each sub-program, including organizational structure, is provided in Appendix B. The Trade Management Program is part of the larger Revenue and Trade Management program activity in the CBSA’s Program Alignment Architecture.Footnote 14 The sub-programs are administered from National Headquarters and the regions.Footnote 15

Trade Incentives programs
The CBSA administers the Trade Incentives programs on behalf of the Department of Finance Canada. The purpose of the programs is to keep Canadian companies competitive and encourage business in Canada by providing relief, deferral or refund of some or all duties and taxes otherwise payable on imported goods. In 2011-2012, CBSA expenditures for these programs were approximately $3.14M.Footnote 16

Licensing programsFootnote 17
The CBSA authorizes, by licence, private and commercial entities to engage in cross-border trade activities on behalf of importers or the CBSA. In 2011-2012, CBSA expenditures for these programs were approximately $1.69M.Footnote 18

Registration programs
The CBSA’s Registration programs serve to expedite the importation and release of commercial goods whereby an importer posts monetary security, or a commercial carrier obtains a unique client identifier which facilitates carrier tracking. In 2011-2012, CBSA expenditures for these programs were approximately $1.01M.Footnote 19

Exhibit 1: List of CBSA’s Trade Incentives, Licensing and Registration programs

Trade Incentives programsFootnote 20 Licensing programs Registration programs
  • Customs Bonded Warehouses (CBW)
  • Duties Relief
  • Duty Drawback
  • Remission Orders
  • Canadian Goods Abroad
  • Obsolete or Surplus Goods
  • Temporary Importations
  • Sufferance Warehouses
  • Customs Brokers
  • Duty Free Shops
  • Coasting Trade
  • Release Prior to Payment (RPP)
  • Carrier and Freight Forwarder Codes

Evaluation Purpose and Scope

The purpose of the evaluation was to assess the relevance and performance and efficiency of the Trade Management Program, in accordance with the Treasury Board Policy Directive on the Evaluation Function. The CBSA’s Program Evaluation Division (PED) carried out the evaluation research between August 2012 and March 2013. The following quantitative and qualitative data collection methods were used: review and analysis of program documentation and data, interviews with key internal and external program stakeholders, site visits, and a survey of CBSA-licensed customs brokers. A more detailed explanation of the research methodology is provided in Appendix D. The evidence collected was triangulated to develop the findings, and the recommendations are based on these findings.

The evaluation scope included all Agency Trade Management Program and operational activities pertaining to Trade Incentives, Licensing and Registration program activity areas. An evaluation plan and framework were developed based on the expected outcomes identified in the program logic model (Appendix C) that was developed in consultation with program management.

Exhibit 2 lists the evaluation questions that were used to assess program relevance and performance.

Exhibit 2: Evaluation Questions

  • Evaluation Issue: Relevance (Is there a continued and on-going need for the program?)
    • Is there an ongoing need for the programs and are they aligned with the CBSA mandate?
    • Are the programs aligned with Government of Canada priorities?
  • Evaluation Issue: Performance - Achievement of Expected Outcomes (Are the programs achieving the expected results?)
    • To what extent is compliance monitored? To what extent are trade participants compliant?
    • To what extent do the Trade Incentives programs promote trade and keep participating companies competitive?
    • Are clients consulted with and informed of program requirements in an effective manner?
  • Evaluation Issue: Efficiency and Economy (Demonstration of Efficiency and Economy)
    • Are the programs delivered efficiently?
    • Are there more efficient or economical methods to achieve the expected results?

Calibration

Activities related to the CBSA Assessment and Revenue Management (CARM) InitiativeFootnote 21, and the Tariff, Origin and Valuation programs were not included in the scope of this evaluation. CARM will be addressed in a separate future evaluation, and the latter was addressed in a recently completed evaluation.Footnote 22

Both the Customs Bonded and Sufferance Warehouse Licensing sub-programs were evaluated as part of the 2010 CBSA-Licensed Warehouse Programs: Sufferance and Customs-Bonded Warehouses Evaluation Study. This evaluation used information from the previous evaluation in order to utilize evaluation resources effectively and to avoid duplication. In addition, the CBSA is currently modernizing some of the programs through the Cargo Control and Sufferance Warehouse Modernization (CCSWM) Initiative. As a result, these sub-programs were not reviewed in depth for this evaluation.

Evaluation Research Limitations

Expenditure data for the Trade Incentives programs were not provided for two regionsFootnote 23, as these regions only track trade program spending as a whole. As these regions represent a small percentage of total spending by the regions, it did not materially affect the findings. Expenditures for the Licensing and Registration program activities in the regions could not be determined. As a result, it was not possible to fully analyze efficiency of program activities.

No data was available on the impacts to the Canadian economy resulting from duties and taxes relieved, deferred and/or refunded through the Trade Incentives programs. A survey was conducted of customs brokers to obtain feedback on their experiences with the availability and quality of CBSA information. Interviews with trade association representatives were also conducted. A survey was conducted of importers. However, the participation rate was too low to be considered useful to the evaluation.  

2. Key Findings – Relevance

Is there an ongoing need for the programs and are they aligned with the CBSA mandate?

There is a rationale and a need for the Trade Incentives and Registration programs. They are relevant to the mandate of the CBSA. While the value of existing services provided by the Licensing sub-programs is not in doubt, the rationale for the CBSA’s involvement in issuing licences is not clear.

Trade Incentive Programs
The purpose of the Trade Incentives programs is to assist Canadian businesses to compete globally and encourage business in Canada by reducing the costs on imported goods which will not enter the Canadian domestic market immediately. This acts to increase their cash flow, particularly for the Customs Bonded Warehouse sub-program, as duties and taxes are only paid at the time the goods are released into the Canadian economy. For some trade incentives sub-programs, imported goods are subsequently exported from Canada, sometimes after undergoing further transformation. 

The CBSA’s mandate is to provide integrated border services which include services on behalf of other government departments. The Customs Tariff, which contains provisions for the various trade incentives programs, is the responsibility of the Department of Finance Canada. Section 9 provides the authority to the Minister of Public Safety and Emergency Preparedness to exercise powers under the Customs Tariff. As trade incentives apply to imported goods, the CBSA is delegated to grant relief or refund of duties. To this end, it identifies evidence and information requirements when an application is required, verifies supporting documentation and program requirements, and/or issues or cancels a licence (e.g. Customs Bonded Warehouse) and conducts compliance verification activities.

Exhibit 3 lists the total amount of duties and taxes deferred in fiscal year 2011-2012 under the Customs Bonded Warehouse Program. Under this program, imported goods can be stored for up to four years after which duties and taxes must be paid, i.e. when the goods are released into the Canadian economy.

Exhibit 3: Total Duties and Taxes Deferred, FY 2011-2012

Trade Incentives program Total monies deferred ($)
Customs Bonded Warehouses $671,894,580

Source: Trade Incentives Unit

Exhibit 4 lists the total amount of duties relieved or refunded in 2011-2012.

Exhibit 4: Total Duties Relieved and Refunded, FY 2011-2012

Trade Incentives programsFootnote 24 Total monies relieved
and/or refunded ($)
% share of total monies relieved and
refunded for all Trade Incentives sub-programs
Duties Relief $125,290,404 17.9%
Remission Orders $427,201,855 60.3%
Duty Drawback $67,565,315 9.5%
Canadian Goods Abroad $80,406,012 11.4%
Obsolete & Surplus Goods $8,002,863 1.1%
Total $708,466,449 100%

Source: Trade Incentives Unit

In time, as more free-trade agreements are negotiated and come into effect, and tariffs reduced, the rationale for the Trade Incentives programs will diminish. Exceptions are the Customs Bonded Warehouse, Canadian Goods Abroad, Remission Orders and Temporary Importations sub-programs, as these are also tax (GST/HST) deferral or reduction programs, and taxes must still be paid regardless of the elimination of tariffs.

Registration and Licensing programs

The majority of these programs support CBSA’s strategic outcome related to the facilitation of international trade across Canada's border while also ensuring Canada’s population is protected from border-related risks.

The Customs Act contains provisions for all of the Licensing and Registration programs, with the exception of the Coasting Trade Licensing sub-program. The Coasting Trade Act (administered by the Canadian Transportation Agency) delegates to the Minister of Public Safety and Emergency Preparedness the issuance of coasting trade licences for foreign ships, which allow the CBSA to track a ship’s activities for purposes of collecting duties and taxes. The Coasting Trade Licensing sub-program is aligned with the CBSA’s Revenue and Trade Management Program mandate to ensure that duties and taxes owed to the Government of Canada are collected in compliance with Canadian trade and imports reporting requirements.

Other Licensing and Registration programs support CBSA’s strategic outcome related to the facilitation of international trade across Canada’s border to quickly enter into the Canadian economy while also ensuring Canada’s population is protected from border-related risks. The Sufferance Warehouse Licensing sub-program moves inspection activities away from the physical border. The Release Prior to Payment (Account Security) sub-program allows importers to obtain release of goods imported into Canada before paying any duties or taxes, and the Carrier and Freight Forwarder Codes sub-program provides commercial carriers of imported goods with unique client identifiers which allows the CBSA to track the movement of goods.

Duty free shops support tourism and were intended to attract more foreign visitors to Canada by offering tax and duty free savings on the purchase of goods prior to leaving the country. The CBSA issues licences to operate a duty free shop and conducts compliance verifications to ensure that goods imported duty and tax-free by shop operators do not enter the Canadian economy. They function similarly to Customs bonded warehouses for commercial goods and, for control purposes, are located at points of exit where CBSA Ports of Entry are located.

The CBSA issues licences to customs brokers who provide assistance to importers in meeting CBSA requirements related to the importation process. The importer is ultimately responsible should any errors occur. [*] The emphasis, based on the administrative guidelines, is on CBSA performing an annual review of the amount of financial security held by customs brokers.Footnote 25 Customs brokers provide an important service to importers; therefore, there is a rationale for the function. However, the rationale for the CBSA to licence them is not clear. There is a rationale for a government licensing program when a public interest is being served. If client protection is not integral to a licensing program however, there may be an opportunity for industry self-regulation. Self-regulated industries set and enforce standards of conduct for the industry to protect clients and promote the integrity of the industry.

Recommendation:
Programs Branch, in cooperation with Operations Branch, centralize the Agency’s licensing and registration processes and ensure that
service standards for all sub-programs are implemented. In addition, Programs Branch, in cooperation with Operations Branch, conduct an analysis of the need for the CBSA to be involved in the issuing of licences.

Are the programs aligned with Government of Canada priorities?

Trade incentives form part of a larger Government of Canada strategy to increase the competitiveness of the Canadian economy, therefore are aligned with Government of Canada priorities. Overall, the Licensing and Registration programs are relevant to federal government priorities by facilitating international trade through the expedited importation of goods into the Canadian economy.

The Trade Incentives programs support broad Government of Canada priorities related to economic growth and increasing the competitiveness of the Canadian economy. This includes lower corporate tax rates, an increased investment climate, a duty-free tariff regime on imports of manufacturing inputs and machinery to be fully implemented by 2015, and promoting export opportunities for Canadian-produced goods and services.Footnote 26 Also, the 2013 Economic Action Plan provides measures to promote Canada’s free trade zone advantage of which trade incentives form one component. Further, Canada’s duty and tax relief is geographically flexible in that it is not restricted to certain geographic locations as free trade zones around the world typically are. The Trade Incentives programs contribute to an environment that is conducive to keeping “participating” Canadian businesses competitive.

3. Key Findings – Performance

To what extent is compliance monitored?

Trade Incentives programs

Regions are responsible for monitoring compliance in accordance with Trade Incentives program regulations and guidelines. However, there is a wide range, both within and between regions, in compliance verification practices. There is also limited national oversight to determine the effectiveness of existing strategies. As a result, a complete picture is not available about the degree and level of compliance with the regulations.

The risk with all Trade Incentives programs is that the CBSA could be deferring, relieving or refunding duties and taxes that it should be collecting.Footnote 27 Based on the CBSA legislation and regulations, monitoring should be taking place regularly and according to established guidelines. Some risks are mitigated through the application eligibility process, others through verification processes, and others yet through post-importation audit processes. [*]

The lack of a risk assessment process and monitoring strategy was also noted in the 2010 CBSA-Licensed Warehouse Programs: Sufferance and Customs-Bonded Warehouses Evaluation Study, which included a recommendation that the CBSA conduct a risk assessment of the Sufferance and Customs Bonded Warehouse sub-programs and develop a monitoring strategy, including performance indicators and resource requirements for its implementation that aligns to the risks identified.Footnote 28 The Management Response to this recommendation indicated a risk assessment would be conducted for customs bonded warehouses by 2011. However, there was no information available for this evaluation.

There is also an application process for many of the Trade Incentives programs, each with different eligibility criteria and different application processes and procedures. Based on consultations with the Department of Finance in preparation for the 2011 federal budget, feedback was received from trade stakeholders advocating the integration of current federal Trade Incentives programs with a simplified application process.Footnote 29

To what extent are trade participants compliant?

Based on available data for the Trade Incentives Programs, some sub-programs have higher rates of compliance than others. The amount gained in additional revenues from audit and compliance verification activities ranged from 0.3% of to 12% of the total amount of duties and taxes deferred, relieved or refunded.

Customs Bonded Warehouses sub-program

Exhibit 3 illustrated that for the Customs Bonded Warehouse sub-program, the total amount deferred in 2011-2012 was $671.9M. This Trade Incentives program represents the highest risk in terms of potential revenue loss if the CBSA did not collect duties and taxes on goods stored in CBWs when they are subsequently released into the Canadian economy. However, results of audits in one region available for the evaluation (in Exhibit 5) indicate that 0.3% of the total amount deferred was gained in additional revenues resulting from these audits.

Exhibit 5 – Duties and Taxes Deferred and Subsequently Collected from Audits

[*] [*] [*] [*] % of total revenue deferred [*]
subsequently collected from audits
[*]
[*] [*] [*] [*] 0.3% [*]

[*]

The small amount of additional revenue obtained indicates that, at least in the Quebec region, customs bonded warehouse operators are compliant. Audits require in-depth inspections whereby customs bonded warehouse operators’ records are matched to goods in stock. Footnote 30 The high compliance level may be the result of the requirement for bonded warehouse owners to post financial security on goods stored in them. The amount is 60% of the value of goods stored in a bonded warehouse which acts as a disincentive to the warehouse operators to subsequently release goods without submitting final accounting against which duties and taxes are paid by the importer. If it is discovered that goodsFootnote 31 were released without final accounting, the operator is responsible for payment of 100% of the value of released goods. The 2010 CBSA-Licensed Warehouse Programs: Sufferance and Customs-Bonded Warehouses Evaluation Study found that almost all goods stored in bonded warehouses were released into the Canadian economy, rather than exported.

Duties Relief sub-program

Exhibit 4 illustrated that for the Duties Relief sub-program, the total amount relieved in 2011-2012 was $125M, representing 17.9% of total duties relieved or refunded that year. Based on the information available on the results of Duties Relief verifications, and as shown in Exhibit 6, a larger percentage of duties relieved in this sub-program was subsequently re-gained from the detection of non-compliance than was the case for the Customs Bonded Warehouse sub-program. Unlike the latter sub-program, there is no need to post financial security for goods imported into Canada under the Duties Relief sub-program, which removes the deterrence against non-compliance.

Exhibit 6 - Duties Relieved and Re-gained in Additional Revenues from Verifications

Time Period [*] [*] [*]
2009-2010 [*] [*] [*]
2010-2011 [*] [*] [*]

[*]

Other sub-programs

Exhibit 4 illustrated that for the Remission Orders sub-program, the total amount of duties waived in 2011-2012 was $427M, representing 60.3% of total duties relieved or refunded. This is the largest percentage of any duties relief or refund sub-program and therefore represents the highest risk in terms of potential revenue loss.Footnote 32 Also illustrated is the total amount refunded for the Duty Drawback sub-program, which was $68M, representing 9.5% of total monies relieved or refunded that year. No monitoring or compliance data was available for these sub-programs.

[*] For instance, allowing goods to be stored duty and tax free (i.e. Customs Bonded Warehouse sub-program) requires the posting of financial security, and is therefore integral to on-going operations. This would also be the case with the Duty Drawback sub-program which requires the submission of a claim for a refund against duty already paid. Whereas, with the Duties Relief sub-program, an application is processed in advance of goods being imported and a licence number is granted for all future importations of the same product, which is presented on the accounting documentation and which grants automatic exemption from duties. No financial security is posted and no refund claims are required to process relief from duty. Also, based on the above available data from audits and verifications, the Duties Relief sub-program resulted in relatively more monetary gains than the Customs Bonded Warehouse sub-program.

Recommendation:
The Programs Branch determine the type of compliance regime that would best serve the Trade Incentives Program and the CBSA, and develop a strategy and detailed implementation plan in cooperation with the Operations Branch, including the establishment of targets related to the compliance results expected. This is also to include a performance measurement and monitoring strategy.

Licensing programs

  • [*]
  • Duty-Free Shop licensees are required to maintain accurate accounting and inventory control systems as specified in the Imported Goods Records Regulations. Domestic and imported goods sold and exported from a duty-free shop inventory are to be reported out of inventory on a monthly basis and provided to CBSA. While verifications are typically done once a year, their frequency varies between regions or within the same region. No data was available in this regard.
  • There was no compliance data for the Coasting Trade Licensing sub-program. Based on the Resource Allocation ModelFootnote 33 only 0.5 of an FTE is dedicated to processing Coasting Trade licenses. CBSA is involved in ensuring compliance at the time it reviews licence applications. As the Canadian Transportation Agency puts forward the recommendation for licensing, the CBSA considers risks to be inconsequential.
  • Customs brokers are required to post security on goods imported on behalf of importers. The CBSA monitors account security levels to ensure the correct amount of security is posted. Apart from that, the risk is assessed through the customs broker eligibility determination process.Footnote 34 The account security of all customs brokers (259) was reviewed in December 2012, which resulted in decreasing the level of security for 21 customs brokers and increasing it for 25 customs brokers.Footnote 35 Due to the fact that the importer is ultimately accountable for reporting and accounting for imported goods, one potential risk associated with the Customs Broker Licensing sub-program is customs brokers’ non-compliance with the regulatory requirements which may result in penalties for which the importer is responsible. There is no data available in this regard.  

Registration programs

  • From 2007-2008 to February 2013, participants within the Release Prior to Payment program defaulted on $12.25M of debt (i.e. duties and taxes). Of this amount, $4.35M was collected, $7.90M was uncollectedFootnote 36, and $70,000 is still under collection. Debt is mainly GST, and since GST is not used to calculate importers’ security, the bond in place is usually not sufficient to cover the debt.

Exhibit 7 lists the most common penalty issued in each of the three program areas.

Exhibit 7 - Number and Value of Penalties by the Three Broad Program Activity Areas*

Program Activity Area Average annual no. of AMPs Average annual value of AMPs Most common penalty issued (Explanation) % of total annual no. of AMPs in program activity area % of total annual value of AMPs in program activity area
Trade Incentives** 107 $109,149 Non-compliance occurs when a verification, audit, or examination determines that a company does not make records available to an officer for review purposes. 38.10% 49.72%
Licensing 1,768 $1,545,279 Non-compliance occurs when the information required to be provided in a permit, certificate, licence or declaration in respect to imported goods is incorrect. 47.64% 41.58%
Registration 3,012 $2,192,095 Non-compliance occurs when a broker/importer fails to pay or only partially pays their K84 by the date specified on the K84. 69.33% 18.17%

Source: CMRS data. *Some penalties could apply to programs outside the three broad program activity areas. **This includes the number of CBSA clients who are non-Trade Incentives program participants (i.e. importers and carriers) who store goods in customs bonded warehouses.

To what extent do the Trade Incentives programs promote trade and keep participating companies competitive?

The Trade Incentives programs keeps participating companies competitive by reducing costs and improving cash flow.

From 2007-2008 to 2011-2012, the total value of duties and taxes deferred, relieved or refunded (i.e. $7.82B) as a percentage of the total duty and tax revenue collected by the CBSA was 6.4%. As illustrated in Exhibit 8, in 2011 under 1% of importers participated in four of the Trade Incentives programs, and 8% participated in the Remission Orders sub-program.

Exhibit 8: Number of Participants* in the Trade Incentives Programs, 2011-2012

Trade Incentives Sub-Programs
Fiscal Year CBW** Duties Relief Draw-back Remission Orders Canadian Goods Abroad Obsolete and Surplus Temporary Importations
2011-2012 199 304 1,584 18,474 1,309 55 N/A
% of All Importers
(232,565) Footnote 37
- 0.13% 0.68% 7.94% 0.56% 0.02% -

Source: Trade Incentives Unit: Number of Participants. Customs Commercial System: Number of Importers. *The number of participants is not mutually exclusive. Some importers may have participated in more than one trade incentive sub-program. **The number of participants for the Customs Bonded Warehouse program refers to those who have a licence to operate a warehouse.

No performance data was available on the impact of the Trade Incentives programs on the Canadian economy as a whole. As an export nation, reducing the costs of imported goods which will be used for subsequent exports is conducive to trade and therefore promotes trade.

Are clients consulted with and informed of program requirements in an effective manner?

Customs brokers, who rely on the information communicated by the CBSA in order to serve their clients/importers, are very satisfied with the availability and quality of CBSA information. CBSA consultations also take place with the importing community to ensure they are informed. The Department of Finance promotes the Trade Incentives programs on its website and provides links to the CBSA website. Also, of the seven sub-programs that have service standards in place related to the application process, they were met for the following four sub-programs: Customs Broker, Sufferance Warehouse, Customs Bonded Warehouse and the Carrier Code sub-programs.

Program information is available on the CBSA website. D Memoranda containing regulations and guidelines are available and updated. Customs notices are published and legislative changes are open to public consultations in the Canada Gazette, as well as published on the CBSA website.

A survey of customs brokers was conducted for this evaluation to obtain views regarding the availability and quality of CBSA information in general and specifically as it relates to the Customs Broker Licensing sub-program, which indicated high satisfaction ratings. The Agency’s website is the top source of information used by customs brokers whether they are seeking information about CBSA trade programs (80%)Footnote 38 or the Customs Broker Licensing sub-program itself (71%). Most of the respondents indicated that the website is useful, clear and complete. Footnote 39 Overall, respondents were satisfied with the support they receive from the CBSA,Footnote 40 with most indicating they were aware of all the requirements related to the Customs Broker Licensing sub-program.Footnote 41 The national association representing customs brokers was also listed as an important source of information, with 50% of respondents indicating this as a source for information related to CBSA trade programs. These results illustrate that customs brokers rely on the availability and accuracy of information communicated by the CBSA in order to serve their clients/importers well.

The CBSA engages with external stakeholders through the Border Commercial Consultative Committee, and its 12 sub-committees, comprised of representatives of major national associations. For the Sufferance Warehouse Licensing sub-program, CBSA representatives meet regularly with external stakeholders on the Cargo Control and Sufferance Warehouse Modernization initiative, and also conduct ad hoc meetings with other government departments to discuss the impact of this initiative on their programs.

In 2011-2012, the CBSA Departmental Performance Report stated that the Agency largely maintained its service standards. In support of this, seven of the thirteen sub-programs have service standards in place four of which were met, i.e. Customs Broker, Sufferance Warehouse, Customs Bonded Warehouse and the Carrier and Freight Forwarder Code sub-programs.Footnote 42 No information was available on whether service standards were met for the other three sub-programs that publish service standards, i.e. the Duties Relief, Duty Drawback and Release Prior to Payment sub-programs.

4. Demonstration of Efficiency and Economy

Are the programs delivered efficiently?

In 2011-2012, CBSA expenditures for the Trade Incentives, Licensing and Registration programs activities were approximately $3.14M, $1.69M and $1.01M respectively.Footnote 43

Trade Incentives programs

The cost to deliver the Trade Incentives programs (excluding the Northern Ontario and Atlantic regions) decreased from $3.66M (57.78 FTEs) in 2007-2008 to $3.14M (43.06 FTEs) in 2011-2012. Within national headquarters, the programs cost decreased from $1.47M to $785,000 over the same period. During the same period, the total amount of duties and taxes deferred, relieved for each dollar in salary expenditures increased from $386 in 2007-2008 to $440 in 2011-2012.

Over the same five-year period, the annual average amount of duties and taxes deferred, relieved and/or refunded by the Trade Incentives programs was $1.56B (an annual average of $814M for duties and taxes deferred and an annual average of $746M for duties relieved and refunded). For each dollar in salary expenditures for the programs, an annual average amount of $442 of duties and taxes were deferred, relieved and/or refunded.

The annual amount of duties and taxes deferred, relieved and/or refunded ranged from $352 in 2009‑2010 to $560 in 2008-2009 for each dollar in salary expenditures. In 2008-2009, the total amount of duties and taxes deferred, relieved and/or refunded was the highest at $2.12M while the annual amount of salary expenditures was $3.8M. In 2009-2010, the total amount of duties and taxes deferred, relieved and/or refunded was the lowest at $1.36M while the annual amount of salary expenditures was at its highest at $3.86M.

Prior to fiscal year 2012-2013, annual fees were charged for one of the Trade Incentives programs, the Customs Bonded Warehouse sub-program. From 2007-2008 to 2011-2012, $1.94M in fees were collected, or approximately $389,000 annually. This fee offsets the costs of the program. However, it was eliminated in 2013-2014 as part of Canada’s Economic Action Plan to increase the competitiveness of the Canadian economy.

Licensing programs

Based on the licensing Resource Allocation ModelFootnote 44, the cost to process current and new licences is consistent across all Licensing programs with the exception of the Coasting Trade Licensing sub-program, which is significantly higher due to a number of additional procedures. The average cost of three sub-programs is within a narrow range.

In 2012-2013, the Licensing programs were expected to cost $522,000.Footnote 45 Exhibit 9 provides ratios of salary expenditures and number of hours to process a license for each Licensing sub-program.

Exhibit 9 - Cost Per Licence (processing current and new licenses), FY 2012-2013

Licensing program Salary* expenditures per licence Number of hours per licence Number of New Licence Applications Number of Licence Renewals (or Professional Exams)
Sufferance Warehouse Licensing sub-programFootnote 46 $106 2.4 36 1,142
Customs Broker Licensing sub-program $110 2.4 12 280
Customs Broker Professional Examination** $148 (per exam) 3.2 (per exam) 125 exams N/A
Duty Free Shop Licensing sub-program $94 2.1 0 10
Coasting Trade Licensing sub-program $558 11.6 88 N/A

Source: Resource Allocation Model. *Including Management/supervisory expenditures and hours. **The Custom Broker Professional Examination is calculated separately from the Custom Broker Licensing sub-program.Footnote 47

For those sub-programs that renew licences (all except the Coasting Trade Licensing sub-program), renewal occurs on a regular basis and therefore requires more total time than issuing new licences, and is more costly as a result. Duty Free Shop licences are renewed every five years, and the Customs Broker and Sufferance Warehouse licences are renewed annually. Renewal activities include verifying that the annual renewal fee has been paidFootnote 48 and any follow-up action to ensure licensees continue to meet regulatory requirements. Duty Free Shop licences are renewed after ensuring that financial security, provincial liquor authority and all other program requirements continue to be met.

The process to issue new licences is similar for all of the Licensing programs, with some exceptions. One major exception is the Coasting Trade Licensing sub-program, which explains the large difference in number of hours to process a licence and the cost. Here, the CBSA also looks for evidence of compliance with safety and pollution prevention regulations, and proof that crew documentation requirements stipulated by Human Resources and Skills Development Canada/Service Canada and Citizenship and Immigration Canada have been met, in addition to collecting the appropriate taxes and duty.

Fees are also currently collected for two of the Licensing programs, the Customs Brokers and Sufferance Warehouse Licensing sub-programs.Footnote 49 From 2007-2008 to 2011-2012, $1.8M and $2.7M were collected respectively in fees for the Customs Brokers and Sufferance Warehouse Licensing sub-programs, or approximately $360,000 and $540,000 annually.

Registration programs

The cost to deliver the Registration programs remained stable from 2007-2008 to 2011- 2012, averaging $1.01M annually.

Are there more efficient/economical methods to achieve the expected results?

The Trade Incentives programs overlap to a limited extent with the Import for Re-export Program (IREP) for agricultural commodities delivered by Foreign Affairs, Trade and Development Canada (FATDC). Having one federal government entity offer the benefits would create efficiencies.

FATDC administers the Import for Re-export Program (IREP) under the authority of the Export and Import Permits Act. IREP allows participants to receive supplemental import allocations of specified agricultural commodities that will be re-exported within deadlines (normally 90 to 180 days), and does not permit diversion of imports to the domestic market.Footnote 50 Clients (i.e. poultry importers) who were rejected from FATDC’s program were subsequently accepted for duties relief. This has the potential to create confusion.

The Government of Canada’s Red Tape Reduction Action PlanFootnote 51 highlighted several areas where efficiencies can be gained at the CBSA to streamline processes for the importing community, such as single window delivery and service standards for the timely issuance of licenses. There are also separate application processes for many of the trade incentive sub-programs, each with different procedures, which could benefit from streamlining.

For many of the Trade Incentives programs covered in this evaluation, risks are mitigated through the application eligibility process. As a result, there are separate application processes for each, with different procedures. A simplified application process was also raised during the consultations with the Department of Finance and trade stakeholders in preparation for the 2011 federal budget. The Government of Canada’s Red Tape Reduction Action PlanFootnote 52 highlighted several areas where efficiencies can be gained at the CBSA to streamline processes for the importing community. Among others, they include single window delivery and service standards for the timely issuance of licences.

5. Conclusion

There is a rationale and a need for the Trade Incentives and Registration programs. They are relevant to the mandate of the CBSA. The rationale for the necessity of CBSA’s involvement in issuing some licences is not clear and there may be some benefit to alternative delivery mechanisms. For all three program areas, communication and consultation tools are in place to ensure the importing community is informed and engaged, and participants have access to and benefit from the programs. There is a lack of a national risk management strategy, performance measurement data, and national records pertaining to compliance rates for the Trade Incentives programs in particular.

A detailed summary of the key findings, recommendations, management response and action plan resulting from this evaluation can be found in the Executive Summary.

Appendix A – Acronyms and Abbreviations

AMPs
Administrative Monetary Penalties
BIS
Border Information Service
CARM
CBSA Assessment and Revenue Management system
CBSA
Canada Border Services Agency
CCS
Customs Commercial System
DFATD
Department of Foreign Affairs, Trade and Development
FIRM
Facility for Information Retrieval Management
FTE
Full Time Equivalent
GTA
Greater Toronto Area Region
IREP
Import for Re-Export Program
NHQ
National Headquarters
OGD
Other Government Department

Appendix B – Program Overview

Program Overview (at the time of the evaluation)

Trade Incentives programs

The CBSA delivers a number of Trade Incentives programs that enable it, under certain circumstances, to waive (relieve), postpone (defer) or refund (draw back) some or all duties and taxes that would otherwise be payable. These programs include:

Customs Bonded Warehouse sub-program
The Customs-Bonded Warehouse sub-program offers relief from payment of most duties and some taxes on imported goods.Footnote 53 Taxes and duties are only paid if and when goods enter the Canadian economy. Privately owned and operated, customs-bonded warehouses are licensed by the CBSA and provide for up to four years of complete deferral of customs, anti-dumping, countervailing and excise duties and the goods and services tax (GST)/harmonized sales tax (HST).Footnote 54 CBSA activities in support of this sub-program include checking applicants that have applied to start operating a customs-bonded warehouse to ensure eligibility and inspection of proposed customs-bonded warehouse facilities. The Agency also collects annual licensing fees and conducts ongoing monitoring of goods and facilities. In 2011-2012, there were approximately 199 active Customs Bonded Warehouses.

Duties Relief sub-program
The Duties Relief sub-program enables qualified companiesFootnote 55 to import goods without paying duty upon entry to Canada provided that the goods are intended for export. Under this sub-program, members may conduct manufacturing of these goods prior to export. The CBSA validates applicant information, conducts on-site verification of applicants, and manages the licensing process. In 2011-2012, the CBSA had approximately 304 clients under the Duties Relief sub-program.

Duty Drawback sub-program
The Duty Drawback sub-program allows importers, exporters, processors owners or producers of goods to obtain refunds of duties paid within the last four yearsFootnote 56 on goods exported either in the same condition or after using, consuming or expending them to process other goods to be exported. To claim a drawback, applicants must complete Drawback Claim Form K32 and provide supporting documentation (e.g. proof of export, waivers) demonstrating that conditions under the legislation and regulations have been met.Footnote 57 The CBSA validates supporting documentation, requests further documentation where required, determines whether goods qualify under program legislation and issues refunds (drawbacks) to claimants for qualified goods.

Obsolete or Surplus Goods sub-program
The Obsolete or Surplus Goods sub-program provides a refund of duties paid on goods which will not enter the domestic marketFootnote 58 due to factors such as obsolescence or being surplus to needs.Footnote 59

Canadian Goods Abroad sub-program
The Canadian Goods Abroad (CGA) sub-program provides importers with full or partial relief from duties and GST/HST on goods that are returning from repair or modification outside of Canada. Under this sub-program, the duty is payable only on the value added to the Canadian goods in the form of labour and/or additional material. The CBSA determines whether goods qualify under program legislation, other than for repairs, must grant authorization prior to export of qualified goods.Footnote 60 The sub-program can also be used for goods requiring emergency repairs outside of Canada.

Temporary Importations sub-program
The Temporary Importations program allows importers to bring qualified goods,Footnote 61 such as goods being repaired in Canada or goods imported temporarily for demonstration purposes, temporarily without payment of duties and/or GST/HST. The CBSA processes Temporary Admission Permits (Form E29B) and CarnetsFootnote 62 (issued by international Chambers of Commerce) and other documents required under the program to document the importations, collect security against the duties and taxes otherwise payable and provide an expiry date. The CBSA also holds bonds (local, regional or national) for brokers/importers that frequently import temporarily and wish to post standing security using a bond.Footnote 63 Where goods are not eligible for full duty and tax relief, the goods must be documented on a Form B3 and the applicable non-refundable duties and/or taxes paid.

Remission Orders sub-program
Remission Orders grant remission of the GST/HST and/or duties paid or payable as specified in the Orders-in-Council.Footnote 64 The term “remission”Footnote 65 applies to the waiving of all, or a portion of, duties paid or payable under the authority of section 23 of the Financial Administration Act or section 115 of the Customs Tariff. For goods that qualify under an Order-in-Council, the Remission Order exempts the importer and/or goods from the payment of duties and taxes.Footnote 66

Licensing programs

The licensing of commercial entities ensures that businesses are authorized to engage in commercial activities related to cross-border trade.Footnote 67 Licensing programs include:

Customs Broker Licensing sub-program
The Customs Broker licensing sub-program allows Canadian individuals, partnerships and corporationsFootnote 68 to act as an agent for the owner or importer of goods, and to account for and pay duties under section 32 of the Customs Act on behalf of the owner/importer. Under the program, the CBSA validates applications and supporting documents, administers annual examinations of program applicants, screens program applicants to ensure that they meet the requirements of program legislation, collects annual fees and financial security and makes the decision on applicant eligibility for licensing. In 2011-2012, there were 259 licensed customs brokers.

Duty Free Shop (DFS) Licensing sub-program
The Duty Free Shop Licensing sub-program licenses private individuals and businessesFootnote 69 to own and operate shops at airports and land border ports of entry, acquire goods free of certain duties and taxes, and sell those goods to travelers who will immediately export the goods from Canada. The CBSA issues calls for applications, reviews letters of interest and application packages,Footnote 70 collects financial security, makes decisions on applicant eligibility for licenses, and monitors licensees to ensure compliance with program legislation.Footnote 71 In 2011-2012, there were fifty-two duty free shop licenses, 33 of which are at the land border and 19 at airports.

Sufferance Warehouse Licensing sub-program
The Sufferance Warehouse Licensing sub-program allows importers to temporarily store (up to 40 days) in-bond goods at locations away from a port of entry for the purpose of CBSA’s secondary examination, deconsolidation and/or release into the Canadian economy. The CBSA validates applicant information, collects annual feesFootnote 72 and financial security, conducts on-site verification of applicants and facilities, determines applicant eligibility for a licence, and conducts ongoing monitoring of licensees to ensure compliance with program requirements. In 2011-2012, there were 1,143 sufferance warehouse licences. Approximately 35 new licences are issued annually.

Coasting Trade Licensing sub-program
The Coasting Trade Licensing sub-program licenses foreignFootnote 73 and non-duty-paidFootnote 74 marine vessels to operate temporarily in Canada on a duty-reduced or duty-free basis where no suitable Canadian vesselFootnote 75 is available.Footnote 76 Once the Canadian Transportation Agency issues a Letter of Decision that there are no suitable Canadian vessels available to do the activity specified on the application, the CBSA ensures that all supporting documents are presented, including the letter of authorizationFootnote 77 issued by the CBSA Licensing Unit; evidence of compliance with safety and pollution prevention regulations, and proof that crew documentation requirements stipulated by HRSDC/Service Canada and Citizenship and Immigration Canada (CIC) have been met. The CBSA issues the Coasting Trade Licence and also processes licensee declarations (form A6).Footnote 78 In 2011-2012, there were 83 Coasting Trade program licences.

Registration programs

The CBSA’s Registration programs include:

Release Prior to Payment sub-program (Account Security)Footnote 79
Through the Release Prior to Payment sub-program, importers and customs brokers can expedite the release of imported goods and defer the payment of duties and taxes until month end, provided they post monetary security (account security). The CBSA maintains financial security records, assesses and monitors applicant eligibility for the program, issues client identifiers, receives accounting information for goods imported by program participants, generates account statements, collects duties and taxes owed, monitors participants to ensure compliance with program legislation, and issues penalties to program participants who contravene program legislation. In 2011-2012, there were 2,684 participants in the Release Prior to Payment sub-program.

Carrier and Freight Forwarder Codes sub-program
All freight forwarders,Footnote 80 carriers or other parties authorized to report commercial goods to the CBSA electronically or on an approved cargo control document are required to have a CBSA issued carrier or identifier code. The carrier code is a unique four-character client identifier used by the CBSA for carriers in all modes of transportation. Since the Carrier Code Revitalization Initiative became effective on April 1, 2011, the CBSA has issued unique carrier codes to each commercial carrier (previously a generic carrier code was accepted).Footnote 81 The CBSA validates carrier code applicant information, assesses applicant eligibility for the program, holds financial security for bonded program participants,Footnote 82 and issues penalties to program participants who contravene program regulations. In 2011, approximately 330 applications were received each month and an average of 244 new carrier codes was issued monthly. In 2011-2012, there were 25,530 active highway, air, rail and marine carrier and freight forwarder codes.

Organizational Structure (at the time of the evaluation)

Trade Incentives programs
The Trade Programs Directorate within the Programs Branch provides oversight for CBSA Trade Programs, including the Trade Incentives and Licensing programs. The Trade Incentives Unit, within the Trade Compliance Division of the Trade Programs has responsibility for policy development and program oversight related to the suites of Trade Incentives programs. The Quality Assurance Unit within the Trade Programs Directorate conducts quality assurance on textile remission orders in support of the Remission Orders sub-program.

Licensing programs
The Assessment and Licensing Unit within the Trade Policy Division of the Trade Programs Directorate has responsibility for policy development and providing functional support for the Customs Broker Licensing, Duty Free Shop Licensing, Sufferance Warehouse Licensing, Coasting Trade Licensing and the Release Prior to Payment (RPP) sub-programs.

The Cargo Control and Sufferance Warehouse Modernization Unit, within the Commercial Border Programs Division of the Border Programs Directorate has overall responsibility for modernizing the Cargo Control and Sufferance Warehouse programs to better align with eManifest and other modernization programs (e.g. CARM).

The Commercial Operations Unit (COU) within the Commercial and Trade Operations Division of the Border Operation Directorate provides operational support and guidance for the Sufferance Warehouse Licensing sub-program, and issues licences for four sufferance warehouse types.Footnote 83

The Commercial Registration Unit within the Commercial and Trade Operations Division of the Border Operations Directorate supports the Customs Brokers and Duty Free Shop sub-programs licensing activities.Footnote 84

Registration programs
The Border Programs Directorate within the Programs Branch has overall responsibility for national program performance; regulations and legislation related to the movement of commercial goods, travellers and their goods. The Import Programs Unit within the Commercial Border Programs Divisions manages the carrier code database; develops and manages related policies and provides functional guidance to the regions to ensure consistent messaging to clients.

The Commercial Registration Unit within the Commercial and Trade Operations Division of the Border Operation Directorate manages and issues Carrier Codes for commercial carriers and freight forwarders and manages account security level for Release Prior to Payment participants.Footnote 85

Pre-approval screening and verifications activitiesFootnote 86 are conducted by CBSA officers in the Greater Toronto Area, Pacific, Prairie and Quebec regions. CBSA officers also manage licences,Footnote 87 coordinate brokers’ examinations at local venues and verify documentation requirements for trade incentives applicants to ensure legislative and regulatory conditions are met.

Appendix C – Program Logic Model

In consultation with key CBSA stakeholders, a logic model was developed which presents a visual representation that links what the Program does (activities) with what the Program produces (outputs) and with what the Program intends to achieve (outcomes) (Exhibit C-1). It was also the basis for developing the evaluation framework, which provided a roadmap for conducting this evaluation.

Trade Incentives, Licensing and Registration Program Logic Model

1. Program Mandate: To ensure that Canadian companies remain competitive by providing relief from duties under special circumstances, and facilitate the free flow of goods that meet all requirements under the program legislation.

2. Activities::

  • 2.1 Program Administration
    • 2.1.1 Develop, revise and publish legislation, regulations, policies and procedures
      • Outputs: Legislation, regulations, policies and procedures (leads to activities 2.1.2, 2.2.1 and 2.2.2), and
      • CBSA website updates, mailings, publications (leads to immediate outcomes 3.1 and 3.3)
    • 2.1.2 Provide functional guidance, training and support to internal stakeholders
      • Outputs: Requirements, direction, recommendations (leads to immediate outcomes 3.1, 3.2, 3.3 and 3.4 and activities 2.1.1 and 2.3.1)
    • 2.1.3 Provide functional guidance and support to external stakeholders
      • Outputs: Requirements, direction, recommendations (leads to immediate outcomes 3.1, 3.2, 3.3 and 3.4 and activities 2.1.1 and 2.3.1)
  • 2.2 Collaboration
    • 2.2.1 Participate in internal and interdepartmental working groups, consult with CBSA staff
      • Outputs: Issues identification, agreements (leads to immediate outcomes 3.1, 3.2 and 3.3 and activity 2.1.1)
    • 2.2.2 Collaborate and engage with external stakeholders
      • Outputs: Issues identification, agreements (leads to immediate outcomes 3.1, 3.2 and 3.3 and activity 2.1.1)
  • 2.3 Program delivery
    • 2.3.1 Collect broker and warehouse licensing fees. Monitor financial security
      • Outputs: Fees, financial security (leads to immediate outcome 3.2)
    • 2.3.2 Validate client applications and documentation. Conduct risk assessments. Manage client identifiers
      • Outputs: Validated data/ records, qualified program participants, decision on client identifier (leads to immediate outcomes 3.2 and 3.4)
    • 2.3.3 Conduct monitoring activities of external stakeholders
      • Outputs: Internal reports, notification to clients, claims, penalties (leads to immediate outcomes 3.2 and 3.4 and activities 2.1.1 and 2.3.1)

3. Immediate outcomes::

  • 3.1 CBSA officers have the knowledge, skills and tools to deliver program activities (leads to intermediate outcome 4.1, 4.3 and 4.4)
  • 3.2 Risks are identified and mitigated (leads to intermediate outcome 4.2)
  • 3.3 Clients are aware of Trade Incentives, Licensing and Registration requirements (leads to intermediate outcome 4.2, 4.3 and 4.4)
  • 3.4 Clients benefit from and/or have access to program privileges (leads to intermediate outcomes 4.3 and 4.4)

4. Intermediate outcomes::

  • 4.1 Protection of monies owing to the Crown (leads to ultimate/strategic outcome 5)
  • 4.2 The trade community complies with Canada’s trade legislation, regulations and policies (leads to ultimate/strategic outcome 5)
  • 4.3 The importation process is facilitated for clients and for the CBSA (leads to ultimate/strategic outcome 5)
  • 4.4 The CBSA meets international commitments (leads to ultimate/strategic outcome 5)

5. Ultimate/strategic outcome: International trade is facilitated across Canada’s border and Canada’s population is protected from border-related risks.

Appendix D – Evaluation Methodology

Document and Literature Review

In order to understand the gather background and contextual information about the Agency’s TILR programs, the evaluation reviewed documents including working group and committee reports and presentations, planning documents, legislation, D Memoranda, procedures, training materials, manuals, previous evaluation studies and audits, correspondence, and minutes from meetings. The evaluation also reviewed literature including trade and academic journals, annual reports and online content of other government departments, other international customs organizations (i.e. the United States, United Kingdom, New Zealand, Australia and the European Union), the World Customs Organization, and the World Trade Organization.

Operational, Performance and Financial Data Analysis

The evaluation assessed program performance data and statistics, as well as budget, expenditure and financial impactFootnote 88 data from fiscal year 2007-2008 to 2012-2013 to assess the performance and efficiency of the program. At the time of the evaluation, the Licensing programs had developed a Resource Allocation Model (RAM) to estimate the average processing time and cost of each program activity which was used to assess performance and efficiency of the Licensing programs. A RAM was not available for the Trade Incentives or Registration programs. Files and data related to public complaints filed on TILR-related matters were also reviewed and included Ministerial Correspondence related to the TILR programs.

Key Stakeholders Interviews

The evaluation conducted a total of 44 one-on-one and group interviews to gather information on the design and performance of the program from the perspectives of different stakeholders. These included 11 interviews with CBSA management and staff at NHQ, 28 interviews with CBSA regional management and staff, one interview with management at another government department, and 4 interviews with trade community stakeholder associations.

Site Visits

Site visits were used to gather regional data, to observe regional processes and workflow and to conduct interviews with regional management and delivery staff. Offices in the Greater Toronto Area, Pacific and Quebec regions were visited in October and November 2012.

Survey

A census telephone survey of CBSA-licensed customs brokers was conducted to collect information on the effectiveness of the Customs Broker licensing sub-program from the client perspective, the ongoing need for the program, the quality of the support provided by the CBSA, and to identify aspects of the program that are most effective and areas where changes and/or improvements are required. In total, 181 out of the 264 licensed Customs Brokers completed the survey in January 2013.

Footnotes

Footnote 1

Source: CBSA Comptrollership data (includes data for NHQ and the regions, excluding Northern Ontario and Atlantic regions).

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Footnote 2

Section 24(1) of the Customs Act provides the authority for the CBSA to issue licences.

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Footnote 3

Source: CBSA Comptrollership data (includes data for NHQ only).

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Footnote 4

Source: CBSA Comptrollership data (includes data for NHQ only).

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Footnote 5

This percentage is high relative to the other sub-programs because the number of participants in this sub-program is considerably higher (18,474 in 2011-2012) than for the other sub-programs (see Exhibit 8 for number of participants for each sub-program).

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Footnote 6

A methodology of allocating resources to an activity based on indicators and drivers impacting costs (both direct and indirect costs), expected workloads (volumes), performance targets and service standards.

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Footnote 7

The fee for the Sufferance Warehouse Licensing sub-program is expected to be eliminated pending Governor in Council approval of a regulatory amendment to the Customs Sufferance Warehouses Regulations.

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Footnote 8

Source: CBSA Comptrollership (this amount is for NHQ only).

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Footnote 9

Government of Canada Red Tape Reduction Action Plan, 2012. Source: Treasury Board Secretariat. http://www.tbs-sct.gc.ca/rtrap-parfa/rtrapr-rparfa-eng.asp.

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Footnote 10

Government of Canada Red Tape Reduction Action Plan, 2012. Source: Treasury Board Secretariat. http://www.tbs-sct.gc.ca/rtrap-parfa/rtrapr-rparfa-eng.asp.

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Footnote 11

Source: http://www.cbsa-asfc.gc.ca/agency-agence/who-qui-eng.html, accessed June 4, 2013.

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Footnote 12

Source: Statistics Canada & US Census Bureau.

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Footnote 13

Sources: Statistics Canada (CANSIM, table 228-0043): Total value of imports and CMRS data: Commercial shipments released and duty and tax revenues collected in fiscal year 2011-2012.

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Footnote 14

Source: CBSA Report on Plans and Priorities 2012-2013.

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Footnote 15

Although the CBSA has seven regions, for purposes of the Revenue and Trade Management program there are four regions: Quebec region (which includes the Atlantic region), Greater Toronto Area (which includes the Northern Ontario and Southern Ontario regions), Prairies region and Pacific region.

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Footnote 16

Source: CBSA Comptrollership (includes data for NHQ and the regions, excluding Northern Ontario and Atlantic regions).

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Footnote 17

Section 24(1) of the Customs Act provides the authority for the CBSA to issue licenses.

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Footnote 18

Source: CBSA Comptrollership data (includes data for NHQ only).

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Footnote 19

Source: CBSA Comptrollership data (includes data for NHQ only).

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Footnote 20

Two other sub-programs were not included in the scope of this evaluation: Canadian Goods Returned and Goods Repaired/Altered in a Free Trade Partner country.

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Footnote 21

CARM is a major government initiative that will modernize the Agency's revenue management programs and systems, as well as automate the many current manual processes required to collect, assess, manage and report on these revenues. By 2020, CARM will enable clients to make electronic payments, receive electronic statements and eliminate the need to file paper-based B2 adjustment forms. Source: CBSA Web site http://www.cbsa-asfc.gc.ca/prog/carm-gcra/menu-eng.html#a1, accessed June 4, 2013.

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Footnote 22

Queen’s warehouses and Frontier examination warehouses were also excluded, since these programs or facilities do not provide a trade incentive, and do not require licensing or registration. Queen’s warehouses provide extended storage of unclaimed, abandoned, detained and seized goods. Frontier examination warehouses are used for the examination of unreleased goods at highway ports of entry. They both are CBSA operated.

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Footnote 23

Northern Ontario (NORO) and Atlantic regions.

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Footnote 24

Does not include Temporary Importations, Canadian Goods Returned or Goods Repaired/Altered in a Free Trade Partner country. The latter two were not included in the scope if this evaluation.

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Footnote 25

[*]

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Footnote 26

Source: Budget 2013. Government of Canada Website: http://www.budget.gc.ca/2013/doc/plan/chap3-2-eng.html

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Footnote 27

Other risks identified by the evaluation include Regulatory and Health, Safety and Security risks which relate to the Agency’s responsibility to ensure that certain participants meet the conditions of program health, safety and security requirements. The evaluation focused on financial risks which are considered the most relevant to the Trade Incentives programs. Regulatory risks relate to the Agency’s responsibility to ensure that participants meet the conditions of program eligibility requirements.        

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Footnote 28

[*]

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Footnote 29

Source: Department of Finance website: http://www.fin.gc.ca/ftz-zf/index-eng.asp.

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Footnote 30

Customs Bonded Warehouses use a standalone database for inventory purposes with no interconnectivity to the main CBSA Customs Commercial System (CCS) accounting system. CCS is a national mainframe system used primarily to record the presentation, accounting and adjustment of the B3 Canada Customs Coding forms (or their electronic equivalent) and is used in the Customs Bonded Warehouse sub-program.  Information on duties and taxes payable and paid is found in a different system (FIRM: Facility for Information Retrieval Management) and requires extensive reconciliation which has an impact on monitoring customs bonded warehouse activities as it takes considerable time to generate warehouse reports.

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Footnote 31

60% of the total value of the maximum amount of duties and taxes that would be payable at any time in the year following the issuance of the license.

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Footnote 32

Risks are mitigated by verifying the supporting documentation demonstrating that the conditions under the legislation and regulations have been met. This documentation could include but is not exclusive to a copy of the export sales invoice together with evidence of export. D8-4-1 (Information Pertaining to Remission Orders) specifies that where an order sets out conditions that must be met after the importation of the goods, the importer must be prepared to provide proof of compliance should the importation be subject to verification.

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Footnote 33

Resource Allocation Model is a methodology of allocating resources to an activity based on indicators and drivers impacting costs (both direct and indirect costs), expected workloads (volumes), performance targets and service standards.

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Footnote 34

This includes verification of personal and work references, an applicant’s security bond information, enforcement database checks to ensure no infractions against the client exist and that the client meets the good character requirement. After approval of the application by CBSA NHQ management, the region completes a site inspection of the applicant’s place of business.

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Footnote 35

Customs brokers’ security level is based on the monthly average in duties and taxes paid on behalf of their clients.

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Footnote 36

When the Canada Revenue Agency’s (CRA’s) Revenue Collections Branch exhausts all possibilities for recovering any balance owing, they will contact the CBSA’s Commercial Registration unit to request that a claim be filed against the account security holder’s bond. When the debt exceeds the total amount of the bond, the remaining amount is automatically written off, and therefore uncollected.

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Footnote 37

CBSA statistics on the number of importers is available by calendar year. Therefore, the calculation of percentage of program participants for FY 2011-2012 was based on the number of importers for the 2011 calendar year.

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Footnote 38

This was followed by CBSA’s regional offices in which 46% of respondents said they use this office as a source of information. Twenty-two percent have phoned the Business Information Service.

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Footnote 39

Ninety-two percent indicated it was useful, 93% indicated it was clear, 92% indicated the information was easy to find, and 92% indicated it was complete. Multiple responses were allowed. Most customs brokers surveyed who used CBSA’s regional offices for information about CBSA trade programs agreed that the information is useful (94%), complete (91%), clear (88%), and timely (87%). Most customs brokers surveyed who used CBSA’s BIS line for information about CBSA trade programs agreed that the information is useful (79%), clear (79%), complete (82%) and timely (77%).

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Footnote 40

Fifty-seven percent were moderately satisfied and 30% provided a strong satisfaction rating.

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Footnote 41

Fewer than 1% of customs brokers said they were not aware of either the security deposit requirement or the requirement to hold a licence for each office; and 3% were not aware of the site inspection.

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Footnote 42

Source: Departmental Performance Report (2011-2012). Service standards from date of receipt of completed application: Sufferance and Customs Bonded Warehouses Licence (60 business days); Customs Broker License (license processed within four months; results received within four weeks of exam); Carrier Code (10 business days); Duties Relief and Drawback (90 calendar days); and Release Prior to Payment (RPP) program (21 calendar days). There are no service standards in place for the Canadian Goods Abroad, Obsolete and Surplus Goods, Remission Orders and Temporary Importation sub-programs as well as the Duty Free Shop and Coasting Trade Licensing sub-programs.

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Footnote 43

Regional data for the Licensing and Registration programs was not available. Data for the Trade Incentives programs include both NHQ and the regions (with the exception of the Atlantic and Northern Ontario regions).

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Footnote 44

A methodology of allocating resources to an activity based on indicators and drivers impacting costs (both direct and indirect costs), expected workloads (volumes), performance targets and service standards.

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Footnote 45

The 2012-2013 figures were projected costs based on the RAM methodology and apply only to the Operations Branch in NHQ (not the Programs Branch) and the regions. Therefore, they differ from the actual costs provided by the Controllership for the Licensing program in 2011‑2102 which applied to both the Programs and Operations Branches in NHQ.

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Footnote 46

The Cargo Control and Sufferance Warehouse Modernization (CCSWM) initiative is expected to improve the cost-efficiency of the Sufferance Warehouse Licensing sub-program. The CCSWM initiative is estimated to save the Agency $4.5M from 2013 to 2015.

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Footnote 47

Source: D1-8-3. The examination is intended for individuals intending to take the position of qualified officer on their behalf or on behalf of a partnership or corporation. A qualified officer is a requirement of the Customs Broker Licensing sub-program.

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Footnote 48

This is required once a year for Customs Brokers ($600) and Sufferance Warehouse ($500) licensees. There is no licensing fee required for Duty Free Shops.

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Footnote 49

The fee for the Sufferance Warehouse Licensing sub-program is expected to be eliminated pending Governor in Council approval of a regulatory amendment to the Customs Sufferance Warehouses Regulations.

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Footnote 50

Under this program Canadian processors import dairy products for processing or repackaging to manufacture dairy or food products for re-export. The products imported under IREP are not subject to tariffs charged under DFATD. However importers still must pay the applicable dairy fees. Source: http://www.international.gc.ca/controls-controles/prod/agri/dairy-laitiers/notices-avis/823.aspx?lang=eng

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Footnote 51

Government of Canada’s Red Tape Reduction Action Plan. Source: Treasury Board Secretariat. http://www.tbs-sct.gc.ca/rtrap-parfa/rtrapr-rparfa-eng.asp

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Footnote 52

Government of Canada’s Red Tape Reduction Action Plan. Source: Treasury Board Secretariat. http://www.tbs-sct.gc.ca/rtrap-parfa/rtrapr-rparfa-eng.asp

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Footnote 53

As long as those goods are stored in a Customs-Bonded Warehouse.

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Footnote 54

Intoxicating liquor may be stored for up to 5 years, and spare parts for aircraft or vessels, oceanic cable, oil-drilling supplies and related parts and equipment that are not intended for domestic consumption for up to 15 years.

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Footnote 55

The Duty Relief sub-program license is issued under the authority of the Customs Tariff and the Duties Relief Regulations. After a visit of the company premises, pending a confirmation of applicant’s qualification and awareness of participant’s obligations, the application may be approved by the CBSA and if approved a unique licence number is issued identifying the applicant as a Duties Relief sub-program participant.

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Footnote 56

In the case of spirits, wine, or beer that are imported goods described in paragraph 89(1)(b) of the Customs Tariff on which the relief of duties would otherwise have been granted, an application for drawback shall be made within five years after the date on which the imported spirits, wine or beer were released.

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Footnote 57

The Customs Tariff and the Goods Imported and Exported Refund and Drawback Regulations are the governing authorities for the program.

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Footnote 58

The obsolete or surplus goods sub-program allows for a refund of duties paid when imported goods, which have not been used in Canada and are either obsolete or surplus, are destroyed under the direction of a border services officer. Where a border services officer is not present at time of destruction, sufficient documentation must be supplied to enable the border services officer to determine that the obsolete or surplus goods have been destroyed. The following documents must accompany the claim: a certified copy of Form E15, Certificate of Destruction/Exportation. Source: D7-2-3 (Obsolete or Surplus Goods).

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Footnote 59

For example, used clothing imported in bulk, in bales, sacks, or similar packing not entering the Canadian economy by way of resale, fibre recovery, or used in the manufacture of wipers or rags, and determined to be unsalable may be considered to be obsolete or surplus goods.

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Footnote 60

Applications must be submitted at least three months in advance of exportation to provide CBSA sufficient time for review. In some cases, importers are asked to “provide proof satisfactory to the CBSA that the goods could not have been repaired in Canada within a reasonable distance from the place where the goods were prior to export.”

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Footnote 61

Generally, most goods being imported as long as they are not for sale, lease or further manufacturing, will qualify for customs-free duty entry under tariff item No. 9993.00.00.

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Footnote 62

Canada is a signatory to the international Customs Convention on the A.T.A. Carnet for the Temporary Admission of Goods. This convention provides an alternative to Canada’s Temporary Admission Permit (Form E29B) and eliminates the need to post a security deposit at the time of importation. Importers may obtain an A.T.A. Carnet in the country of export. A.T.A. Carnets are not issued by customs administrations. Security is posted through the guaranteeing association in the issuing country. In Canada, the guaranteeing association is the Canadian Chamber of Commerce. The CBSA assist the Canadian and Foreign Chamber of Commerce or importers/exporters in determining the eligibility of a carnet request. Source: http://www.wcoomd.org/en/topics/facilitation/instrument-and-tools/conventions/pf_ata_system_conven.aspx, accessed June 4, 2013.

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Footnote 63

Source: D8-1-1 (Temporary Importations) (Tariff Item no. 9993.00.00) Regulations. “In cases where goods are imported for temporary purposes throughout the year, importers may wish to deposit standing security in the form of a bond with the CBSA…” The amount of the bond is based on the amount of the duties and taxes, including the GST/HST, which would be owed, if the goods documented on the Form E29B were being imported permanently”.

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Footnote 64

A legal instrument made by the Governor in Council pursuant to a statutory authority or, less frequently, the royal prerogative. All orders in council are made on the recommendation of the responsible Minister of the Crown and take legal effect only when signed by the Governor General. Source: http://www.pco-bcp.gc.ca/index.asp?lang=eng&page=secretariats&sub=oic-ddc&doc=gloss-eng.htm, accessed June 4, 2013.

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Footnote 65

D Memorandum D8-4-1 (Information Pertaining to Remission Orders) distinguishes two types of Remission Orders: Legislative Remission Orders for which applications requests are submitted to the Department of Finance and administrative Remission Orders, related to the administration of Customs Tariff, for which applications are submitted to the CBSA.

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Footnote 66

The CBSA considers applications for remissions where the goods have been imported into Canada and requires all accounting documents or importation permits relating to the goods for which remission is being claimed and the number of the Orders-in-Council for each remission order.

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Footnote 67

Note that the Customs-Bonded Warehouse and Duties Relief sub-programs are also licensed but their intention is to provide an incentive for trade as captured in the previous section.

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Footnote 68

The individual, or at least one partner, director or officer of the company must have sufficient knowledge relating to imports and exports as determined by the completion of the CBSA examination with a pass mark of at least 60%; have the financial resources to conduct business in a responsible manner; be of good character. In addition, the individual, partners, or a majority of directors in the corporation have to be citizens or permanent residents of Canada. Also, in order to remain eligible as a qualified officer, the officer must continue to work in the customs brokerage industry as a qualified officer or as an employee of a licensed customs broker, and must not incur a break in service longer than that specified in D1-8-1 (Licensing of Customs Brokers). Similarly, the applicant must submit a completed application package signed by the qualified officer, which includes security in the amount of $50,000.

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Footnote 69

The DFS Regulations (section 5) specify that only Canadian citizens, permanent residents or corporations incorporated in Canada can be licensed to operate a duty free shop.

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Footnote 70

Proposals are evaluated against specific selection criteria in five main groupings: financial stability, management capabilities and retail/allied experience, site and building proposal, business plan and proposed level of local employment.

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Footnote 71

In 2010, a Strategic Review decision was made to minimize the CBSA’s oversight of the duty-free sector by simplifying the regulations and granting duty-free operators increased autonomy.

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Footnote 72

The Sufferance Warehouse Licensing sub-program collects an annual license fee of $500 (or if the initial fee is collected on or after October 1, $250).

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Footnote 73

A foreign vessel (or ship) is a ship other than a Canadian registered ship.

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Footnote 74

A non-duty paid ship is a ship registered in Canada for which duties and taxes under the Customs Tariff and the Excise Tax Act have not been paid.

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Footnote 75

A Canadian ship (or vessel) is a ship that is registered or listed under Part 2 of the Canada Shipping Act, 2001 and in respect of which all duties and taxes under the Customs Tariff and the Excise Tax Act have been paid; or built in Canada and not required or entitled to be registered under Part 2 of the Canada Shipping Act.

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Footnote 76

Operations licensed under the Coastal Trade Act generally include all commercial marine activities such as cruise ships, ferries, cargo supply and repairs to machinery in Canadian waters, including among other things, the carriage of passengers and goods, and offshore exploration and development activities on the Canadian continental shelf. The Act does not apply in respect of any foreign ship or non-duty paid ship that is used as a fishing vessel, as defined by the Coastal Fisheries Protection Act, in any activity governed by that Act and that does not carry any goods or passengers other than goods or passengers incidental to any activity governed by that Act; engaged in any ocean research activity commissioned by the Department of Fisheries and Oceans; operated or sponsored by a foreign government that has sought and received the consent of the Minister of Foreign Affairs to conduct marine scientific research; engaged in salvage operations, except where such operations are performed in Canadian waters; or engaged, with the approval of a person designated as a pollution prevention officer under section 174 of the Canada Shipping Act, 2001 or authorized under paragraph 11(2)(d) of that Act to carry out inspections, in activities related to a marine pollution emergency, or to a risk of a marine pollution emergency.

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Footnote 77

The CTA makes the determination as to whether or not Canadian vessels are available to do the work and notifies the CBSA which issues a letter of authorization outlining the remaining procedures required for the applicant to obtain the Coasting Trade Licence for the vessel and begin operations.

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Footnote 78

All vessels, including Canadian vessels, entering Canadian waters are required under Section 12 of the Customs Act to report their arrival to the nearest CBSA office using Form A6, General Declaration.

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Footnote 79

Release prior to payment allows importers or customs brokers to obtain release of goods before duties and taxes are paid. Importers or customs brokers may take advantage of release prior to payment privileges as long as they post security with the CBSA, account for the goods within the prescribed time limit, and pay duties and taxes owing in full by the due date. Source: D17-1-8 (Release Prior to Payment Privilege).

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Footnote 80

A freight forwarder code cannot be used to transport goods into Canada. A non-bonded freight forwarder code allows a freight forwarder to supply electronic supplementary data for Advance Commercial Information only. Non-bonded freight forwarders only require a freight forwarder code if they plan to transmit cargo data to the CBSA directly or through a service provider. If a freight forwarder is supplying information through a carrier, then a code is not required.

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Footnote 81

Previously, it was possible that a passage (or shipment) could have been attributed to the wrong client due to the generic carrier code, which forms part of each cargo control number: “Impact: With this change, we will avoid recording CSA passages for the wrong client since the first four digits of membership IDs can be valid carrier codes.” Source: ACROSS Information Tips.

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Footnote 82

Only carriers or freight forwarders that have filed security with the CBSA are permitted to transport in-bond goods between points in Canada. (D3-1-1 Policy Respecting the Importation and Transportation of Goods).

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Footnote 83

COU provides final approval of applications for Types BW, SO, SO (CSA) and SL sufferance warehouses on recommendation from regional CBSA management.

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Footnote 84

The Unit collects annual licence fees, issues licences to customs brokers and monitors the Customs Brokers Licensing sub-program, issues and renews duty free shop licences and monitors the Duty Free Shop Licensing sub-program.

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Footnote 85

The Unit is responsible for monitoring account security levels and for arranging penalties (AMPs) for late payment and removes participants from program. In addition it administers and reports to the Programs Branch on the Customs Broker examinations.

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Footnote 86

For example, in support of customs brokers licensing, the good character requirement for qualified officers is established by investigation conducted by the regional director’s office. The investigation examines criminal records and personal and work references. A site visit of the brokers’ business premises is also conducted as well. Regional officers examine the proposed sufferance warehouse to ensure the facility meets all program and regulatory requirements, notably physical security requirements as outlined in the Customs Sufferance Warehouse Regulations. For duties relief licences, on reviewing the completed application, a site visit is conducted of the company premises to confirm adequate control records are in place to track the imported goods while they remain in Canada.

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Footnote 87

CBSA regions process licensing fees, issue, renew, amend, suspend and cancel licences, manage security and performance bonds, identify and collect duties and taxes owing; monitor late payments and administer penalties (i.e. AMPs) and monitor licensees.

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Footnote 88

Because the Trade Incentives programs enable the relief of duties and/or taxes, the evaluation team reviewed data on the actual amounts of monies that were relieved by each program where available.

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